CAPS GET EMS 9 TERM 2 WEEK 2- 7 Credit transactions – Debtors Allowance

DEBTORS ALLOWANCE

When a debtor returns the goods purchased on account, the sale of the goods returned needs to be cancelled. The business will issue a credit note to the debtor and then the return is recorded in the DEBTORS ALLOWANCES JOURNAL.

Debtors may sometimes be unhappy with their purchases and wish to claim a refund (allowance) from the supplier. Some reasons for this include poor quality goods, wrong colour, wrong size, overcharges, errors on the invoice, and so forth.

The debtor then sends a debit note (D/N) to the trader in which the claim is made in respect of the goods returned or overcharge claimed . After investigation the supplier, if in agreement with the claim, issues a credit note (C/N) to the customer.

One copy is sent to the debtor and the other is the source document for the entry in the business’s Debtors Allowances Journal (DAJ)

The DAJ is like a sales returns and overcharges journal.